CARD Act: Pros and cons 3 years later

Still, the decline of students with credit cards has troubling consequences, Ulzheimer says. Banks are wooing young people with prepaid debit cards, a payment type that isn't regulated as closely. And young people face a harder time building good credit without access to credit cards, one of the easier types of credit to qualify for.

"It's good to have no debt, but it doesn't help you to not have a track record of responsibly managed credit accounts," Ulzheimer says. "It's like having a resume with nothing on it."

Worse card terms

That's one of a few negative consequences that came out of the CARD Act, says Ulzheimer. Adding to that, credit card terms are not nearly as attractive as they were before federal regulations kicked in.

The act capped penalty fees, limited how penalty interest rates can be applied, and eliminated certain fees and practices altogether. The rules have hampered how issuers can hedge against lending to riskier borrowers and have slashed profits they make from these consumers.

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The average annual percentage rate, or APR, for variable credit cards -- the most popular type of credit card -- has risen by a percentage point to 15.31 percent from 14.3 percent before the CARD Act was enacted, according to Bankrate's weekly interest rate data in August.

Annual fees also have risen. They averaged $113 last year, up from $80 in 2010, says Roy Persson, director of competitive tracking services at Ipsos Loyalty, a research services company headquartered in Paris.

At the same time, credit limits on new credit cards have fallen 30 percent since 2008, and limits on existing accounts have dropped 17 percent, says Riley.

"The CARD Act doesn't allow creditors to push the risk toward where the risk is coming from," Riley says. "So everyone has to pay for it."

What did it leave out?

While the act was comprehensive, it did miss some key areas. For example, consumers didn't have to get 45 days' advance notice if their credit limits were cut, says Susswein. The act requires issuers to give consumers a heads-up if their interest rate rises, certain fees are increased or other significant changes are made to card terms. However, that doesn't include credit limits.

"That can be a rude shock to people who thought they had a higher limit when in fact they didn't," Susswein says.

Ulzheimer also pointed out that the Consumer Financial Protection Bureau had to step in to clear up one provision that made it harder for stay-at-home spouses to qualify for credit cards. The act mandated that issuers must consider an individual's income -- not household income -- to qualify an applicant. The rule was designed to make it harder for college students to get credit cards based on their parents' income. But the rule also kept nonworking spouses from qualifying for credit cards.

After a massive online petition started by a Virginia stay-at-home mom, the CFPB said in April credit card issuers can consider income and assets that a nonworking individual shares with a spouse or partner when granting a credit card or credit limit increase.

The act's consumer-friendly protections also left out small-business credit cards, which typically are personally guaranteed by the cardholder. In the year after the act was put into law, banks introduced more small-business cards or enhanced existing ones to woo everyday consumers.

"If they really wanted to spread the blanket across the entire bed, the act really should have included small-business cards," Ulzheimer says.

Janna Herron covers credit cards, credit reporting and scoring and other personal finance topics for Bankrate.com. She has appeared as a content expert on local ABC, CBS, NBC and Fox affiliates along with several radio stations nationwide. She also has been quoted by MSNBC.com, CNNMoney, the Los Angeles Times and the Detroit Free Press among other news outlets. Connect with Janna Herron on Google+.

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